2

Author Contact:

Susan L. Sakmar

Visiting Assistant Professor

Andrews Kurth Energy Law Scholar

University of Houston Law Center

susansakmar@globalgaslaw.com

www.susansakmar.com

Twitter: @SusanSakmar

Author of: Energy for the 21st Century: Opportunities and Challenges for LNG

Cover Photo Credit: Jones Township

A whitepaper for:

mailto:susansakmar@globalgaslaw.comhttp://www.susansakmar.com/

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Executive Summary

Overview

By most accounts, the vast shale gas reserves found throughout the world offer an unprecedented opportunity to meet growing energy demand

in a cleaner and more sustainable manner. While the economic and energy security benefits of shale gas development are substantial, the

evolving environmental, social and regulatory responses to shale gas development continue to challenge the industry. As shale gas

development continues to go global, there is likely to be continued scrutiny of how industry and governments are responding to the concerns

raised by citizens in communities where shale gas development is proposed.

Drawing on recent and authoritative studies, this paper addresses the key issues and concerns that will need to be addressed by policy makers

and industry in order to earn what has been called the “social license to operate.” These include challenges related to potential water

contamination, disclosure of chemicals used in hydraulic fracturing, induced seismicity or earthquakes, and greenhouse gas emissions. The

results of recent investigations and studies, such as the on-going US EPA Hydraulic Fracturing Study, as well as various reports from around the

world, will be addressed with the recognition that new data and studies are emerging on a frequent basis making the analysis of the impacts of

shale gas development an ongoing endeavor. The goal with this initial Whitepaper is to highlight some of the preliminary issues governments,

policy makers and citizens will need to address in assessing the potential for shale gas in their respective communities.

Key Findings

The world has vast shale gas resources and there is the potential for shale gas to be a global “game changer.” The economic benefits of shale gas development can be significant but the impact will vary country by country. A significant driver for shale gas development will need to be demonstrated to the public in most countries. In order to earn the social license to operate, governments must develop a successful regulatory framework that ensures that environmental

impacts are adequately regulated and managed. Countries will need to decide which agencies will regulate and how responsibilities will be shared. Whether or not a particular country has the water resources to support shale gas development is a critical issue and consultation with the

appropriate water management agencies is essential. Numerous environmental issues must be understood and addressed in order for the regulatory framework to succeed and be credible with

the general public.

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Figure 1 Worldwide Shale Gas Resources

Source: US EIA/ARI, World Shale Gas Resources (2011)

Global Shale Gas: Earning the Social License to Operate

A World of Opportunity Exists for Shale Gas

By most accounts, the vast shale gas reserves found throughout the world offer an unprecedented opportunity to meet growing energy demand

in a cleaner and more sustainable manner.1

Although experts have known for years about the

potential for shale gas, technological difficulties and the

high costs of producing shale gas historically made it

impractical to consider as a serious energy source.2

More recently, however, technological innovations

combining hydraulic fracturing and horizontal drilling

technologies3 have resulted in a tremendous boom in

shale gas production in the United States over the past

five years.4 This boom seems likely to continue with

leading energy experts proclaiming shale gas an energy

“game changer” that will “revolutionize” global gas

markets and help bridge the gap between conventional

resources and the development of renewable energy

sources.5

Thus far, the United States has been the undisputed

leader in unlocking the vast tracts of gas-bearing shale

found throughout the lower forty-eight states, but the

so-called “shale gale,” the strong wind blown by the

technological advances in hydraulic fracturing and horizontal drilling, is not limited to only North America. Because shale formations exist in

almost every region of the world, the potential for shale gas development is enormous and global in scope.6

5

While various assessments are underway in many countries, one of the most widely known studies was released in 2011 by the US EIA and

assessed 48 shale basins in 32 countries containing almost 70 shale gas formations. Even with this limited assessment, that study found that the

international shale gas resource base is “vast” – with technically recoverable resources of 6,622 Tcf.7 (Figure 1 on the preceding page)

The report noted that these estimates are relatively conservative and likely to go up as more information becomes known and this has certainly

been the case in the US. However, it is also important to note that the report estimated “technically recoverable” resources, which does not

mean commercially viable resources. In other words, it may not make commercial sense to produce all of these resources.

The report also noted that there were two country groupings where shale gas development might be most attractive. The first group consists of

countries that are currently dependent upon natural gas imports and have at least some gas production infrastructure and where their

estimated shale gas resources are substantial relative to their current gas consumption. This group includes France, Poland, Turkey, Ukraine,

South Africa, Morocco and Chile.

The second group includes those countries where the shale gas resource estimate is large and there already exists a significant natural gas

production infrastructure. In addition to the US, this group includes Canada, Mexico, China, Australia, Libya, Algeria, Argentina and Brazil.

An updated assessment from the EIA was released in June 2013 that also included an initial assessment of worldwide shale oil resources. That

assessment indicates technically recoverable resources of 345 billion barrels of world shale oil resources and 7,299 trillion cubic feet of world

shale gas resources. The new global shale gas resource estimate is 10 percent higher than the estimate in the 2011 report.8

Policy Makers Need to Align Shale Gas Drivers with the General Public

As a clean-burning fuel, many business and policy leaders have begun to look to natural gas to meet growing energy demand using more

environmentally sustainable fuels.9 In most countries, however, the “case for gas” is just being developed with policy makers weighing a number

of “shale gas drivers” including energy security, diversity of supply, lowering energy costs, emissions and a host of other reasons. It should be

noted that in the US, one of the early “drivers” of the shale gas revolution was the fact that individual landowners generally own the oil and gas

rights under their land and therefore receive a direct financial benefit when those resources are developed. For other countries without this

incentive, it may be more difficult to convince the general public that a significant financial driver exists for development of shale gas in their

country.

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Figure 2 Global Shale Gas Drivers

More recently, increased focus has been placed on

the potential economic benefits of shale gas

development. For example, In the United States

several studies have been released finding that the

economic benefits of shale gas development have

been quite significant. These studies have

generally concluded that against the background

of a historically slow economic recovery and

persistently high unemployment, the increased

spending associated with shale gas development

throughout the United States has been an

important engine for jobs creation and economic

recovery.10

While these studies are important contributions to

the policy debate in the US, it should be noted that

each country will have to assess the potential

economic impact of shale gas development for their own country depending on a range of factors including assessments of geological potential

which take into account both oil and gas reserves and development activity, estimates of capital expenditures for unconventional oil and gas

activity, and direct, indirect and induced contributions from these activities.11

It should also be noted that the United States has many elements in place to allow the economic benefits of unconventional oil and gas

development to flow through the economy, including a well-established oil and gas industry. It is not clear that many countries have this in

place so policy makers and governments will need to offer credible studies on the potential economic benefits of shale gas for that country and

not merely rely on the economic impacts in the US.

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Figure 3 A Successful Regulatory Strategy

Earning the “Social License to Operate” Requires an Effective Regulatory Strategy to Address Environmental and Social Concerns

In a widely circulated special report from the International Energy Agency (IEA), Golden Rules for a Golden Age of Gas, the IEA cautioned that

natural gas is poised to enter a “Golden Age” but only if a significant amount of the world’s unconventional gas resources are brought to

market.12 This requires considerations of both the profitability of shale gas as well as whether policy makers and the industry successfully

address the legitimate public concerns that have been raised about the associated environmental and social impacts of shale gas development.13

To that end, the IEA suggested seven “golden rules” – framed as best practices – with the goal of aiding industry, governments and other

stakeholders to “earn and maintain a social license to operate.” 14 The seven golden rules highlight the prevailing view that full transparency,

measuring and monitoring environmental impacts and engagement with local communities are critical to addressing public concerns about shale

gas development. The following seven golden rules are principles that can enable governments, industry and other stakeholders to address the

environmental and social impacts of shale gas development:

1. Measure, disclose and engage; 2. Watch where you drill; 3. Isolate well and prevent leaks; 4. Treat water responsibly; 5. Eliminate venting, minimize flaring & other emissions; 6. Be ready to think big; and 7. Ensure a consistently high level of environmental performance.

A Regulatory Strategy for Shale Gas

In order to earn the social license to operate, governments must develop a

successful regulatory framework that ensures that environmental impacts

are adequately regulated and managed. The public must also be convinced

that the regulatory framework is adequate to address the real risks and

that it will be adequately enforced. This framework will necessarily vary

country by country. In the US, the regulatory strategy that is generally

articulated is one that mitigates adverse impacts by providing clear rules and regulations to encourage investment while protecting public safety

and environment.15 (Figure 3)

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In general, most countries that are considering shale gas development are following conventional oil and gas frameworks if those exist. This has

been the experience in the United States, which regulates its conventional oil and gas industry through a variety of federal, state, and local laws

and regulations.16

While various federal law protections exist to mitigate environmental impacts, including provisions in the Clean Air Act, Clean Water Act, Safe

Drinking Water Act, Endangered Species Act, regulation of shale gas development is largely left to the individual States, which regulate through

an oil and gas agency, an environmental agency, or usually both. This means, for example, that State and local governments typically deal with

issues regarding permitting, well spacing, operation, abandonment, surface disturbance, wildlife, worker health and safety, discharges, water

and waste management and disposal, and air emissions.

In the United States, and as discussed in more detail below, conventional oil and gas regulations are evolving to deal with the opportunities and

challenges of shale gas development and a number of US states, including Texas, Colorado and Pennsylvania, have modified and/or enacted new

regulations to address issues raised with unconventional oil and gas development.17

An initial question for many countries will be who will regulate – Federal, state, local - and how will regulatory responsibility be shared. For

countries that do not have a conventional oil and gas framework to start with, the challenges of developing such a framework for

unconventional gas will be more acute. At the World Gas Conference in Kuala Lumpur in June 2012, the CEO of ExxonMobil, Rex Tillerson,

offered his view that “regulations must strike an appropriate balance between proper risk management and economic viability. Governing or

setting policy and regulation based upon the precautionary principle will stifle innovation and investment and bring development to a

standstill.”18

One approach to establishing a regulatory framework for shale gas development in particular is being tested in the United Kingdom, which

recently announced the creation of an Office of Unconventional Gas and Oil (OUGO).19 As envisioned, the UK’s new OUGO will engage with

industry and communities to bring forward proposals to ensure that the people of the UK benefit from shale gas development in their area and

will serve as a single point of contact for industry to ensure an effective, streamlined approach for regulations.20

Environmental Issues and Regulatory Responses

Many countries, including the United States are in the process of development or adjusting their regulatory frameworks to address the

numerous issues and challenges that have been raised pertaining to shale gas development. As such, it is increasingly becoming important to

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Figure 4 Water Lifecycle

Source: US EPA

understand what the legitimate environmental risks are and how regulations might mitigate those risks. This analysis is complicated by the

inherent complexities in oil and gas law but also by the multitude of studies that have been released in the past few years that have served to

increase our knowledge about the potential risks, but has also served to increase the sheer volume of information that governments and

stakeholders must analyze. As such, this paper highlights the most serious risks raised as well as well as a number of the most authoritative

sources addressing those risks with the acknowledgment that there are many more studies that exist than can be addressed in this Whitepaper.

Thus far, the most serious risks related to shale gas development center around the following:

1. The water lifecycle - from water acquisition to disposal; 2. The risk of water contamination and well integrity issues; 3. Disclosure of chemicals used in hydraulic fracturing fluids; 4. Induced seismicity (earthquakes); and 5. Emissions from shale gas production.

1. The Water Lifecycle For Shale Gas Development

By far one of the most critical issues related to shale gas

development pertains to what the US Environmental Protection

Agency (EPA) has called the water lifecycle. At the request of the US

Congress, the US EPA is conducting a study to better understand any

potential impacts of hydraulic fracturing on drinking water and

ground water. 21

The scope of the EPA’s research includes the full lifecycle of water

use in hydraulic fracturing, from acquisition of the water, through

the mixing of chemicals and actual fracturing, to the post-fracturing

stage, including the management of flowback and produced water

and its ultimate treatment and disposal.

This study is significant because to date, it is the most comprehensive study being undertaken on the impact of hydraulic fracturing on water and

the findings may be useful to inform decisions around the world. The EPA’s first progress report was released in December 2012. 22

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A final draft report will be released in 2014 for public comment and peer review. In the meantime, a number of issues have been raised and are

in the process of being studied.

Water Acquisition Issues

With many countries facing acute water shortages, concerns have been raised pertaining to the large volumes of water needed during the

hydraulic fracturing process. According to a report issued by the U.S. Geological Survey (USGS) pertaining to water resources and gas production

in the Marcellus Shale, “many regional and local water management agencies [in the Marcellus shale region] are concerned about where such

large volumes of water will be obtained, and what the possible consequences might be for local water supplies.”23

Chesapeake Energy Corp., one of the most active drillers in the Marcellus shale,24 candidly admits water is an essential component of its deep

shale gas development. According to the company, “fracturing a typical Chesapeake Marcellus horizontal deep shale gas well requires an

average of five and a half million gallons per well.” Industry generally maintains that water resources are protected through stringent state,

regional and local permitting processes and in comparison to other uses, deep shale gas drilling and fracturing uses a small amount of water.

According to Chesapeake, 5.6 million gallons of water is equivalent to the amount of water consumed by New York City in eight minutes, a 1,000

mega-watt coal-fired power plant in 13 hours, a golf course in 28 days, or nine acres of corn in a season.25 Nonetheless, whether or not a

particular country or community has the water resources to support shale gas development is a critical issue and consultation with the

appropriate water management agencies is essential.

Water Disposal Issues – Flowback Water

Related to the issue of how much water is needed for shale gas development is the issue of how to dispose of the water that is returned to the

surface as “flowback” water. While some of the injected hydraulic fracturing fluids remain trapped underground, the majority—sixty to eighty

percent returns to the surface as “flowback.” The USGS has noted that because the quantity of fluids is so large, the additives in a 3-million

gallon frac job would yield about 15,000 gallons of chemicals in the flowback water, making wastewater disposal a significant challenge for many

regions.

The US EPA has noted that wastewater associated with shale gas extraction can contain high levels of total dissolved solids (TDS), fracturing fluid

additives, metals, and naturally occurring radioactive materials.26 The EPA is currently examining the different disposal methods used by the

industry to ensure that there are regulatory and permitting frameworks in place to provide for the safe disposal of flowback and produced

water. In general, wastewater in the US is disposed of in one of several ways:27

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1. Underground injection: In many regions of the US, underground injection is the most common method of disposing of fluids or

other substances from shale gas extraction operations. Disposal of flowback and produced water via underground injection is regulated under

the Safe Drinking Water Act’s Underground Injection Control (UIC) Program.28

2. Wastewater discharges to treatment facilities: Shale gas wastewater is often transported to treatment plants or private

centralized waste treatment facilities for disposal. In the US, a number of concerns have been raised that many treatment facilities may not be

equipped to properly treat such wastewater. As a result, the EPA is currently developing national standards for wastewater treatment with

plans to solicit public comment for a proposed rule for shale gas in 2014.

3. Recycling of wastewater: Some drilling operators are electing to re-use a portion of the wastewater for a future well or to re-

fracture the same well. The ability to re-use waste water is in part dependent on the levels of pollutants in the wastewater and the proximity of

other fracturing sites that might re-use the water.

4. Surface impoundments (pits or ponds): In some cases, operators use surface storage tanks and/or pits to temporarily store

hydraulic fracturing fluids for re-use. The US EPA is currently evaluating industry practices and is considering the need for technical guidance on

the design, operation, maintenance, and closure of pits to minimize potential environmental impacts. Some states now require that all surface

pits be lined with some sort of protective barrier.

2. The risk of water contamination and well integrity issues

In the United States and elsewhere, much of the public debate surrounding hydraulic fracturing has centered on whether “fracking” can lead to

water contamination. In many cases, the concerns raised are whether the fracturing process could create or extend fractures linking the

producing zone to an overlying aquifer and, thus, provide a pathway for gas or fracturing fluids to migrate. However, in most shale formations,

the vertical distance separating the target zone from usable aquifers is usually much greater than the length of the fractures induced during

hydraulic fracturing. Thousands of feet of rock layers typically overlay the produced portion of the shale, and these layers serve as barriers to

flow. Consequently, most regulators and geologists generally consider there to be only a remote possibility that a fracture could extend to a

potable aquifer. However, if the shallow portions of shale formations were developed, then the thickness of the overlying rocks would be less

and the distance from the shale to potable aquifers would be shorter, posing more of a risk to groundwater. 29

To date there is no confirmed case that the hydraulic fracturing process itself has led to water contamination although a possible link has been

raised in one case that is still under review in Pavillion, Wyoming. On December 8, 2011, the U.S. Environmental Protection Agency (EPA) issued

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a draft report on its investigation of groundwater contamination near the town of Pavillion, Wyoming after residents of Pavillion petitioned EPA,

asking the agency to investigate whether groundwater contamination exists, its extent, and possible sources. 30 The draft report indicated that

EPA had identified certain constituents in groundwater above the production zone of the Pavillion natural gas wells that are consistent with

some of the constituents used in natural gas well operations, including the process of hydraulic fracturing. Because the EPA’s draft report linked

groundwater contamination in the deeper portions of the aquifer to activities related to hydraulic fracturing, it raised concerns about hydraulic

fracturing practices in general and attracted a lot of attention in the US. As a result, numerous organizations representing the oil and gas

industry and other stakeholders took issue with some of the findings in the draft report, and questioned the scientific validity of EPA’s

contention. 31 EPA originally intended to extend the public comment period for the draft research report on Pavillion to September 30, 2013.32

However, on June 20, 2013, EPA announced that it turn over any further investigation of drinking water quality in Pavillion to the State of

Wyoming. Accordingly, EPA does not plan to finalize or seek peer review of its draft Pavillion groundwater report released in December 2011.

The sampling data obtained throughout EPA’s groundwater investigation will be considered in Wyoming’s further investigation, and EPA will

have the opportunity to provide input to the State of Wyoming and recommend third-party experts for the State’s consideration. The State

intends to conclude its investigation and release a final report by September 30, 2014. 33

While the Pavillion case remains under review by the State of Wyoming, the general consensus that seems to have emerged is the greater risk

for groundwater contamination is related to the process of developing a natural gas or oil well (drilling through an overlying aquifer, and casing,

cementing and completing the well). Incidents of well water contamination attributed to hydraulic fracturing, typically have been found to be

caused by problems with the well casing or cementing. In some states, such as Pennsylvania, regulators have confirmed that methane had

migrated to water wells and that the gas migration was caused by improperly cased and cemented wells, as well as excessive pressures in some

cases. The challenge of sealing off the groundwater and isolating it from possible contamination is common to the development of any oil or gas

well, not only those that rely on hydraulic fracturing. Nonetheless, given the higher pressures and large volumes of water used in hydraulic

fracturing, a number of states have revised well casing, cementing, pressure testing and other requirements to protect water resources. 34

Another primary concern involves the potential contamination of ground water from surface activities such as accidental or careless surface

disposal of drilling fluids. Other potential water quality issues involve the management (storage, treatment and disposal) of water produced in

the fracturing process.

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Figure 5 Typical shale fracturing fluid makeup and chemicals

3. Disclosure of chemicals used in hydraulic fracturing fluids

A key component to hydraulic fracturing is the high-

pressure injection of hydraulic fracturing fluids that

increases the permeability of the rock by “propping

up” or holding open the fractures. According to the

industry, fracturing fluid is a mixture of about 90%

water, 9.5% sand, and 0.5% other chemicals.35

Although water is the main component of hydraulic

fracturing fluids, a number of additives and chemicals

are also used, the number varying based on the

conditions of the specific well-being fractured and

thus no “one-size fits all formula for the volumes for

each additive.” The chemical additives used include

“common chemicals which people regularly

encounter in everyday life” as well as “chemical

additives that could be hazardous, but are safe when

properly handled.” The service companies that

provide these additives have developed a number of

different combinations to be used depending on the

well characteristics.36

As shale gas development increased in the United States, there were growing calls for the industry to disclose the chemicals used in hydraulic

fracturing fluids. In addition to public calls for disclosure, various members of the US Congress through the US Subcommittee on Energy and

Environment also requested this information from oil and gas companies with companies ultimately complying.37

14

Figure 6 Growing Trend Requiring Disclosure

Source: Ground Water Protection Council, June 2012

More recently, there is a growing trend in the US towards requiring

companies to disclose the chemicals used in hydraulic fracturing with a

number of states now requiring disclosure and more states likely to

follow this trend.

Some states require or allow for the disclosure via FracFocus, which is

a web-based national registry where companies can disclose the

chemical additives used in the hydraulic fracturing process on a well-

by-well basis.38 Canada has a similar website and other countries are

considering something similar for disclosure which is likely to be

required in most countries.

4. Induced Seismicity – Earthquakes

To date, the most significant research pertaining to hydraulic fracturing

and induced seismicity comes from the experiences of the United

Kingdom (UK) and United States. In April and May of 2011, two

earthquakes with magnitudes 2.3 and 1.5 occurred in the UK in an area

where Cuadrilla Resources was hydraulically fracturing for shale gas at

their Preese Hall site in Lancashire. Operations were suspended and Cuadrilla submitted a geotechnical report, which concluded that the

tremors were caused by fracking. The UK suspended all shale gas activity pending review of the incident.39

Following a detailed study and further analysis by an independent panel of experts commissioned by the DECC, along with public feedback and

the benefit of a report by the Royal Society and Royal Academy of Engineering,40 the UK Government ultimately concluded that the seismic risks

associated with fracking can be managed effectively with proper controls in place.41 These controls include:

A prior review before fracking begins must be carried out to assess seismic risk and the existence of faults;

A fracking plan must be submitted to DECC showing how seismic risks will be addressed;

Seismic monitoring must be carried out before, during and after fracking; and

A new traffic light system to categorize seismic activity and direct appropriate responses, including a trigger mechanism, which will stop fracking operations in certain conditions.

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Figure 7 Emissions

Induced Seismicity Caused By Disposal

In the United States, a recent report by the National Research Council (NRC) noted that induced seismicity can be caused by a range of activities

that involve disposal or storage by injection deep into the ground and that this has been known since the 1920s with respect to geothermal

energy and carbon capture and storage. That report concluded that the process of hydraulic fracturing poses a low risk for inducing earthquakes

and notes that over 35,000 wells have been hydraulically fractured for shale gas in the US.42

The NRC report, as well as some recent work done by the US Geological Survey, concluded that there is a greater risk of earthquakes from the

use of injection wells used for the disposal of wastewater in oil and gas development. In the US, there are approximately 150,000 Class II

injection wells, which include about 40,000 waste fluid disposal wells

for oil and gas operations. A small number of these disposal wells

have induced earthquakes that are large enough to be felt and could

cause damage – these are generally earthquakes of magnitude 4.0

or higher. There has also been an uptick in seismic activity in the US

in areas with significant shale gas development, such as Oklahoma,

and additional research is being undertaken.43

5. Emissions

It is generally recognized that natural gas has about half of the CO2

emissions of coal. But, as noted in the IEA’s Golden Rules report,

shale gas has higher production related greenhouse gas emissions

than conventional gas due to more wells being needed per cubic

meter of gas production and more venting or flaring during well

completion.

In its report, the IEA noted that the estimation of greenhouse gas emissions from shale gas production has been the subject of much

controversy, which stems primarily from a study by Professor Robert W. Howarth from Cornell University.44 The Howarth Study evaluated the

greenhouse gas footprint of natural gas obtained by high-volume hydraulic fracturing from shale formations, focusing on methane emissions.

That study found that 3.6% to 7.9% of the methane from shale-gas production escapes to the atmosphere in venting and leaks over the life-time

of a well and that these methane emissions are at least 30% more than and perhaps more than twice as great as those from conventional gas.

16

The study further found that the higher emissions from shale gas occur at the time wells are hydraulically fractured—as methane escapes from

flow-back return fluids—and during drill out following the fracturing. The study noted that methane is a powerful greenhouse gas with a global

warming potential that is far greater than that of carbon dioxide, particularly over the time horizon of the first few decades following emission.

As a result, the study found that the greenhouse gas footprint for shale gas is greater than that for conventional gas or oil when viewed on any

time horizon, but particularly so over 20 years. Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice

as great on the 20-year horizon and is comparable when compared over 100 years.

The IEA Golden Rules report also noted that methane is a more potent greenhouse gas than CO2 but has a shorter lifetime in the atmosphere

and as a result there are various ways to compare the effect of methane and CO2 on global warming – including evaluating the Global Warming

Potential of methane. While noting that methane emissions from the gas chain come from a number of sources including venting and fugitive

emissions, the IEA also indicated that these emissions are VERY difficult to quantify. It should be noted that the Howarth study has been refuted

by other studies including a commentary that is widely cited by the industry that disagreed with the underlying assumptions in the Howarth

study. 45 A number of research activities are underway with various groups conducting a number of emissions related studies.46

Conclusions

While there is a widely held view within the industry that shale gas resources can be developed in a safe and environmentally sound manner, the

public and policy leaders in many regions remain skeptical. Since shale gas development is a global opportunity, there is a growing need to

coordinate and share lessons learned and best practices on a global scale to ensure that the opportunity is not just limited to some areas of the

world.

Some of this work is already underway with the IEA recently announcing the creation of an Unconventional Gas Forum to address key

environmental issues and share insights on operational best practices from around the world.47 In the meantime, it remains to be seen whether

global shale gas will be a “revolution” like it was in the United States, or more of an “evolution” as countries assess their resources, evaluate the

environmental issues and develop regulatory frameworks to effectively manage the many issues that have been raised.

17

Endnotes and References 1 IEA, Golden Rules for a Golden Age of Gas, World Energy Outlook Special Report on Unconventional Gas, May 29, 2012,

http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf. 2 See HALLIBURTON, U.S. SHALE GAS: AN UNCONVENTIONAL RESOURCE, UNCONVENTIONAL CHALLENGES 1 (2008).

http://www.halliburton.com/public/solutions/contents/Shale/related_docs/H063771.pdf. 3 The hydraulic fracturing technology has been so successful that energy experts have called this the “most significant energy innovation so far of this century.” Mary Lashley

Barcella & David Hobbs, Fueling North America’s Energy Future, WALL ST. J., Mar. 10, 2010, at A10. 4 See Hydraulic Fracturing, AM. PETROLEUM INST., http://www.api.org/policy/exploration/hydraulicfracturing (last visited Apr. 5, 2011); see also Advanced Drilling Techniques, AM.

PETROLEUM INST., http://www.api.org/aboutoilgas/natgas/drilling_techniques.cfm (last visited Apr. 5, 2011) (explaining “horizontal drilling” techniques). 5 See Tom Fowler, Energy Game-Changer?, HOUS. CHRON., Nov. 1, 2009, at A1.

6 See Leta Smith & Peter Jackson, Is Unconventional Gas Going Global?, WALL ST. J., Mar. 10, 2010, at A14, available at www2.cera.com/ceraweek2010/NAm2010-03-10.pdf.

7 US EIA, World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, (April 5, 2011), http://www.eia.gov/analysis/studies/worldshalegas/.

8 US EIA, Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States (June 10, 2013),

http://www.eia.gov/analysis/studies/worldshalegas/. 9 For a discussion of the role of natural gas in the 21

st century as well as the divergent views around the world of natural gas, see Susan L. Sakmar, ENERGY FOR THE 21

ST CENTURY:

OPPORTUNITIES AND CHALLENGES FOR LIQUEFIED NATURAL GAS (LNG), Edward Elgar Ltd. (Pub. 2013), available on Amazon http://www.amazon.com/dp/1849804214 . 10

The global energy group IHS is conducting a three-part study on the economic benefits of unconventional oil and gas production in the United States. The first study was released in October 2012, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 1: National Economic Contributions, and concluded that unconventional oil and gas production currently supports more than 1.7 million U.S. jobs and will support nearly 3 million by the end of the decade. The second study, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 2: State Economic Contributions, was released in December 2012 and examines the impact of shale gas development for every state on a state-by-state basis. A third study is underway assessing the economic contributions and prospects for a domestic manufacturing renaissance resulting from unconventional upstream oil and natural gas activity in the lower 48 US states. Information about the IHS research study can be found at http://www.ihs.com/info/ecc/a/americas-new-energy-future-report-vol-2.aspx. 11

These are just a few of the factors considered in IHS’s economic contribution assessment and are listed for illustrative purposes only. 12

The IEA’s Golden Rules for Gas are linked to the IEA’s report released in June 2011, “Are We Entering a Golden Age of Gas?” which laid out a positive outlook for the increased role of natural gas in the world’s energy supply mix in general but was phrased as a question to highlight the uncertainties connected with the potential for growth in unconventional gas supply. 13

IEA, Golden Rules for a Golden Age of Gas, World Energy Outlook Special Report on Unconventional Gas, May 29, 2012, http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf 14

IEA, Golden Rules for a Golden Age of Gas, World Energy Outlook Special Report on Unconventional Gas, May 29, 2012, http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf. The “social license to operate” can be defined as the “degree of societal acceptance” that shale gas will require “in order to flourish.” Id. at p. 15. 15 Christopher Smith, Deputy Asst Secy, Office of Oil and Natural Gas, “Prudent Unconventional Oil & Gas Development: A U.S. Government Perspective,” Presentation to the CWC World Shale Oil & Gas Summit, Sept. 20, 2012. 16

GROUND WATER PROT. COUNCIL & ALL CONSULTING, MODERN SHALE GAS DEVELOPMENT IN THE UNITED STATES: A PRIMER (2009) http://www.netl.doe.gov/technologies/oil-gas/publications/EPreports/Shale_Gas_Primer_2009.pdf [hereinafter GROUND WATER PROT. COUNCIL MODERN SHALE GAS PRIMER].

http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdfhttp://www.halliburton.com/public/solutions/contents/Shale/related_docs/H063771.pdfhttp://www.eia.gov/analysis/studies/worldshalegas/http://www.eia.gov/analysis/studies/worldshalegas/http://www.amazon.com/dp/1849804214http://www.ihs.com/info/ecc/a/americas-new-energy-future-report-vol-2.aspxhttp://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdfhttp://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf

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17

For an overview of key regulatory elements in most of the oil and gas producing US states, see Resources for the Future (RFF), Center for Energy Economics and Policy, Shale Gas Regulations by State, http://www.rff.org/centers/energy_economics_and_policy/Pages/Shale_Maps.aspx. 18

Rex W. Tillerson, Enabling Economic and Environmental Progress: The Role of Natural Gas, Speech to the

World Gas Conference,
Kuala Lumpur, Malaysia, June 5, 2012, http://www.exxonmobil.com/Corporate/news_speeches_20120605_rwt.aspx. 19

The creation of the UK’s Office of Unconventional Gas and Oil was announced by the Government in December 2012 and is part of the of the UK’s Department of Energy and Climate Change (DECC), http://www.gov.uk/government/organisations/department-of-energy-climate-change. 20

UK DECC Press Release, “New Office to look at community benefits for shale gas projects,” March 20, 2013, https://www.gov.uk/government/news/new-office-to-look-at-community-benefits-for-shale-gas-projects. 21

US Environmental Protection Agency (US EPA), EPA’s Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources

http://www.epa.gov/hydraulicfracturing. 22

US EPA, http://www2.epa.gov/hydraulicfracturing 23

Daniel J. Soeder & William M. Kappel, WATER RESOURCES AND NATURAL GAS PRODUCTION FROM THE MARCELLUS SHALE 3–4 (2009) http://pubs.usgs.gov/fs/2009/3032/pdf/FS2009-3032.pdf. 24

Press Release, Chesapeake Energy, Chesapeake Energy Corporation Confirms Decision Not to Drill for Natural Gas in the New York City Watershed (Oct. 28, 2009) available at http://www.chk.com/news/articles/pages/1347788.aspx. 25

Fact Sheet: Water Use in Marcellus Deep Shale Gas Exploration, CHESAPEAKE ENERGY (2010),

http://www.chk.com/media/marcellusmediakits/marcellus_water_use_fact_sheet.pdf [hereinafter CHESAPEAKE ENERGY, Water Use]. 26

US EPA, http://www2.epa.gov/hydraulicfracturing 27

US EPA, http://www2.epa.gov/hydraulicfracturing. 28

Safe Drinking Water Act, 42. U.S.C. § 300f (2005). The SDWA is the primary US federal law for protecting public water supplies from harmful contaminants. Enacted in 1974,

and broadly amended in 1986 and 1996, the SDWA is administered through a variety of programs that regulate contaminants in public water supplies, provide funding for

infrastructure projects, protect underground sources of drinking water, and promote the capacity of water systems to comply with SDWA regulations.

The EPA is the federal agency responsible for administering the SDWA but a federal-state structure exists in which the EPA may delegate primary enforcement and

implementation authority (primacy) for the drinking water program to states and tribes. A key component of the SDWA requires the EPA to regulate the underground injection

of fluids to protect underground sources of drinking water. In terms of oil and gas drilling, the UIC program regulations specify siting, construction, operation, closure, financial

responsibility, and other requirements for owners and operators of injection wells. 29

Mary Tiemann and Adam Vann, Congressional Research Service (CRS) Report for Congress, “Hydraulic Fracturing and Safe Drinking Water Act Issues,” R41760, July 12, 2012, www.crs.gov. 30

U.S. Environmental Protection Agency, Region 8 and Office of Research and Development, National Risk Management Research Laboratory, (Draft) Investigation of Ground

Water Contamination near Pavillion, Wyoming, EPA 600/R-00/000, December 2011, http://www.epa.gov/region8/superfund/wy/pavillion/ EPA_ReportOnPavillion_Dec-8-

2011.pdf. 31

Peter Folger, Mary Tiemann and David M. Bearden, Congressional Research Service (CRS) Report for Congress, “The EPA Draft Report of Groundwater Contamination Near

Pavillion, Wyoming: Main Findings and Stakeholder Responses,” R42327, Jan. 25, 2012, www.crs.gov. 32

EPA Pavillion Groundwater Investigation, http://www2.epa.gov/region8/pavillion. 33 News Releases from EPA Region 8, Wyoming to Lead Further Investigation of Water Quality Concerns Outside of Pavillion with Support of EPA, http://yosemite.epa.gov/opa/admpress.nsf/20ed1dfa1751192c8525735900400c30/dc7dcdb471dcfe1785257b90007377bf!OpenDocument.

http://www.rff.org/centers/energy_economics_and_policy/Pages/Shale_Maps.aspxhttp://www.exxonmobil.com/Corporate/news_speeches_20120605_rwt.aspxhttp://www.gov.uk/government/organisations/department-of-energy-climate-changehttps://www.gov.uk/government/news/new-office-to-look-at-community-benefits-for-shale-gas-projectshttps://www.gov.uk/government/news/new-office-to-look-at-community-benefits-for-shale-gas-projectshttp://www.epa.gov/hydraulicfracturinghttp://www2.epa.gov/hydraulicfracturinghttp://pubs.usgs.gov/fs/2009/3032/pdf/FS2009-3032.pdfhttp://pubs.usgs.gov/fs/2009/3032/pdf/FS2009-3032.pdfhttp://www.chk.com/news/articles/pages/1347788.aspxhttp://www2.epa.gov/hydraulicfracturinghttp://www2.epa.gov/hydraulicfracturinghttp://www.crs.gov/http://www.epa.gov/region8/superfund/wy/pavillion/http://www.crs.gov/http://yosemite.epa.gov/opa/admpress.nsf/20ed1dfa1751192c8525735900400c30/dc7dcdb471dcfe1785257b90007377bf!OpenDocument

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34

Mary Tiemann and Adam Vann, Congressional Research Service (CRS) Report for Congress, “Hydraulic Fracturing and Safe Drinking Water Act Issues,” R41760, July 12, 2012, www.crs.gov. 35

AM. PETROLEUM INST., FREEING UP ENERGY, HYDRAULIC FRACTURING: UNLOCKING AMERICA’S NATURAL GAS RESOURCES 5 (2010), http://www.api.org/~/media/Files/Policy/Exploration/HYDRAULIC_FRACTURING_PRIMER.ashx [hereinafter API FREEING UP ENERGY]. 36

Id. At 61-62. 37

Letter from Rep. Henry A. Waxman, Chairman, Comm. on Energy and Commerce, to 10 Oil and Gas Companies (July 19, 2010), available at http://energycommerce.house.gov/documents/20100719/Letters.Hydraulic.Fracturing.07.19.2010.pdf 38

FracFocus, www.fracfocus.org. 39

UK DEEC, “New controls announced for shale gas exploration,” Dec. 13, 2012, https://www.gov.uk/government/organisations/department-of-energy-climate-change. 40

The leading engineering and science bodies in the UK, the Royal Academy of Engineering and the Royal Society carried out an independent review of the health, safety and environmental risks associated with hydraulic fracturing for shale gas. Their central conclusion is that the risks can be managed effectively in the UK so long as operational best practices are implemented, and enforced through regulation. The Royal Society, Shale Gas Extraction Report, June 2012, http://royalsociety.org/policy/projects/shale-gas-extraction/report. 41

UK DEEC, “New controls announced fro shale gas exploration,” Dec. 13, 2012, https://www.gov.uk/government/organisations/department-of-energy-climate-change. 42

National Academies, Induced Seismicity Potential in Energy Technologies, www.nationalacademies.org. 43

Joe Eaton, “Scientists Say Oil Industry Likely Caused Largest Oklahoma Earthquake,” National Geographic News, March 29, 2013,

http://news.nationalgeographic.com/news/energy/2013/03/130329-wastewater-injection-likely-caused-quake/. 44

Howarth R, Santoro T, and Ingraffea A Methane and the greenhouse gas footprint of natural gas from shale formations. Climatic Change (2011). availilable at http://www.springerlink.com/content/e384226wr4160653/. 45

Lawrence M. Cathles III, Larry Brown, Milton Taam, Andrew Hunte, A commentary on “The greenhouse-gas footprint of natural gas in shale formations” by R.W. Howarth, R. Santoro, and Anthony Ingraffea, Climatic Change (2012) available at http://link.springer.com/article/10.1007%2Fs10584-011-0333-0. 46

Environmental Defense Fund, Methane Leakage, http://www.edf.org/methaneleakage. 47

IEA Press Release, IEA launches Unconventional Gas Forum, March 23, 2013, http://www.iea.org/newsroomandevents/news/2013/march/name,36494,en.html.

http://www.crs.gov/http://www.api.org/~/media/Files/Policy/Exploration/HYDRAULIC_FRACTURING_PRIMER.ashxhttp://energycommerce.house.gov/documents/20100719/Letters.Hydraulic.Fracturing.07.19.2010.pdfhttp://www.fracfocus.org/https://www.gov.uk/government/organisations/department-of-energy-climate-changehttp://royalsociety.org/policy/projects/shale-gas-extraction/reporthttp://royalsociety.org/policy/projects/shale-gas-extraction/reporthttps://www.gov.uk/government/organisations/department-of-energy-climate-changehttp://www.nationalacademies.org/http://news.nationalgeographic.com/news/energy/2013/03/130329-wastewater-injection-likely-caused-quake/http://www.springerlink.com/content/e384226wr4160653/http://link.springer.com/search?facet-author=%22Lawrence+M.+Cathles+III%22http://link.springer.com/search?facet-author=%22Larry+Brown%22http://link.springer.com/search?facet-author=%22Milton+Taam%22http://link.springer.com/search?facet-author=%22Andrew+Hunter%22http://www.edf.org/methaneleakagehttp://www.iea.org/newsroomandevents/news/2013/march/name,36494,en.html